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Loan fund for Detroit small biz recapitalizes, expands its reach

What do a running store in Midtown Detroit and a grocer in a vacant strip mall on the city's east side have in common?

The Urban Retail Loan Fund provided financing for the owners of both Run Detroit, located next door to Shinola, and Parkway Foods, which is opening this spring in The Shops at Jefferson Village near Grosse Pointe Park.

And now, more small businesses will be able to access the fund, which offers loans of between $50,000 and $500,000 to retailers opening in the city.

Launched in 2009, the fund was intended to provide assistance to retail and service businesses in the greater downtown area — including those in Midtown, Corktown and Eastern Market — who couldn't access traditional financing, such as bank loans.

But the loan fund has been so successful that Invest Detroit's board of directors is expanding the geographic boundaries into as-of-yet-unnamed areas.

Dave Blaszkiewicz, president of Invest Detroit

"We discussed bringing our entire toolbox to some pilot neighborhoods as we begin to look at the future of Detroit," said Dave Blaszkiewicz, president of Invest Detroit.

"We now have more clarity thanks to Detroit Future City. ... We are looking at neighborhoods with stabilized housing stock and existing commercial areas we could plug into that have close proximity to jobs."

In addition to expanding its geographic reach, the fund has been recapitalized and is now a $6 million revolving fund, up from the original $2 million, and covered by the state of Michigan, the Michigan Economic Development Corp. and Invest Detroit's own fund, the Detroit Investment Fund.

"This is a fund that was created when we were seeing a lot of adaptive reuse projects, and one of the big challenges we had was finding retail establishments to go on the first floor," Blaszkiewicz said.

It wasn't for lack of interest; it was for a lack of funding.

"The cost of build-out, in these buildings, was very cost-prohibitive," he added. "Even if you had space that was ready to be used, the things that local retailers needed were not things that the banks were comfortable providing. Like tentative improvements or inventory."

Still, that doesn't mean it's free and easy money for any entrepreneur with a dream. The fund is intended to be used as bridge financing or as an additional layer of cash beyond a bank loan. Sometimes, depending on the size of the project, the loan fund will be the only lender.

Derek Edwards, vice president of Invest Detroit

"We prefer to be part of the party, not the life of the party," said Derek Edwards, vice president of Invest Detroit who specializes in the Urban Retail Loan Fund.

The fund has financed 15 deals to date, including participating in The Auburn Development, which is in Midtown and features rental apartments and small businesses, such as Cass Corridog, Hugh, Nora and Source Booksellers.

Part of the reason that development filled up so rapidly, Blaszkiewicz said, is that the build-out costs were amortized out as part of the loans.

"We made that shelf-ready," he said. "(Retailers) had floors, walls, lighting. You could move your shelves in, flip the light on, and be in business. That advances the possibility of getting retail into the space."